Monetary Policy and Regional Inequality

52 Pages Posted: 30 Mar 2020

See all articles by Sebastian Hauptmeier

Sebastian Hauptmeier

European Central Bank (ECB) - Directorate General Economics

Federic Holm-Hadulla

European Central Bank (ECB)

Katerina Nikalexi

European Central Bank (ECB)

Date Written: March, 2020

Abstract

We study the impact of monetary policy on regional inequality using granular data on economic activity at the city- and county-level in Europe. We document pronounced heterogeneity in the regional patterns of monetary policy transmission. The output response to monetary policy shocks is stronger and more persistent in poorer regions, with the difference becoming particularly pronounced in the extreme tails of the distribution. Regions in the lower parts of the distribution exhibit hysteresis, consisting of long-lived adjustments in employment and labor productivity in response to the shocks. As a consequence, policy tightening aggravates regional inequality and policy easing mitigates it.

Keywords: local projections, monetary policy, quantile regressions, regional heterogeneity

JEL Classification: C32, E32, E52

Suggested Citation

Hauptmeier, Sebastian and Holm-Hadulla, Federic and Nikalexi, Katerina, Monetary Policy and Regional Inequality (March, 2020). ECB Working Paper No. 2385, Available at SSRN: https://ssrn.com/abstract=3564206

Sebastian Hauptmeier (Contact Author)

European Central Bank (ECB) - Directorate General Economics ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Federic Holm-Hadulla

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Katerina Nikalexi

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
68
Abstract Views
241
rank
387,330
PlumX Metrics